Gold ETFs record Rs 1,000 crore net outflow in 2014

Gold is losing its sheen as is evident from continuous outflow of money from gold ETFs. According to data from the Association of Mutual Funds in India (AMFI), gold ETFs saw net outflow of money for 12 months in a row with Rs 341 crore net outflow in May 2014, compared to Rs 141 crore in April.

Since the beginning of the year, Gold ETFs have seen net outflow of around Rs 1,000 crore. The asset under management (AUM) of Gold funds dropped by Rs 746 crore in May to Rs 7,781 crore.

"The fall in asset under management by 8.7%- highest in the past eight months-was further magnified by mark-to-market losses as the underlying asset prices (represented by CRISIL Gold Index) fell by 4.8% during the month," says a Crisil Research report.

The last time there was net inflow in Gold ETFs was in May 2013, when they received a net inflow of Rs 5 crore.

Gold prices have been falling in the international markets since last year, when prices fell from $1700 an ounce to $1200. At present, it is trading around $1,250 mark. However, domestic prices were supported by import restrictions put by the government last year to check spiraling capital account deficit.

The new government relaxed some of the restrictions on 21 May. Since then domestic gold prices have fallen from Rs 28,543 per 10 gm to Rs 26,673 on 5 June, a fall of 6.5%.

Experts are predicting gold prices to fall to Rs 23,000-24,000 level if the government removes all import restrictions including a 10% import duty.

Meanwhile, mutual fund AUM crossed Rs 10 lakh crore mark during May on the back of strong inflows in income funds (Rs 10,000 crore), liquid funds (Rs 22,000 crore) and equity funds (Rs 2,000 crore) during May.